Belarus’s refinancing rate will probably remain above the 23 percent target this year as the central bank has no room to lower it amid high deposit rates, Chairman Nadezhda Ermakova said.
The bank, which has chopped 15 percentage points off the world’s highest benchmark rate this year to bring it to 30 percent, has no scope to continue the cuts with average interest rates on deposits at about 40 percent, Ermakova said during BankIT 2012 conference in the capital, Minsk, today.
“The refinancing rate stopped serving its function; it does not influence rates in the country’s financial market,” she said. “The refinancing rate has deviated from the market while the market demands money which is more expensive. Adjusting it this way or that way serves no purpose.”
Belarus has lowered the refinancing rate eight times this year after raising it by a cumulative 34.5 percentage points in 2011 to halt capital outflows after inflation accelerated to 108.7 percent and the ruble depreciated 64 percent against the dollar.
The International Monetary Fund urged Belarus last month to tighten its monetary policy immediately to keep economic stability amid renewed signs of price and exchange-rate pressures.
The central bank wants to bring the refinancing rate to its lowest level since April 2011 by the end of next year, cutting it to between 13 percent and 15 percent, according to monetary- policy guidelines for 2013 approved by the government.
Lowering the rate to 23 percent was also tied to a government target for economic growth of 5 percent this year, which Ermakova said she doubted could be achieved. Year-to-date gross domestic product slowed to 2.2 percent in October from 2.5 percent in September, the state statistics committee said Nov. 13.
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